Today we’re talking about the dangers of undercharging for your product.
1. Almost everybody undercharges for their product, including you. In fact, when Marc Andreessen was asked what advice he would put on a billboard, he said, “Raise Prices”.
2. There’s a myth that having a low price or offering a steep discount will automatically help you close a sale. That’s not the case. Looking at our own buying behaviors — don’t we often splurge on premium products? Price isn’t always the main factor for a purchase.
3. Setting low prices gives you less margin for error. Early on, you need that financial buffer to account for unforeseen costs, refunds, or other mistakes. A higher price provides that wiggle room.
4. Lastly, a lower price means you’ll need to ramp up your distribution efforts. As you’re making less money per customer, you will need a higher sales volume to generate the same revenue.
Best of luck out there.
Sterling Road invests in idea stage and pre-seed B2B startups based in the US, Canada and UK.
